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Targeted Medical
Pharma, Inc. (the “Company” or “TMP”), also doing business as Physician Therapeutics
(“PTL”), is a specialty pharmaceutical company that develops and commercializes amino acid based medications.
On July 30, 2007, the Company formed Complete Claims Processing, Inc. (“CCPI”), a wholly owned subsidiary
which provides specialty billing and collection services for our products dispensed by physician clients and to physician clients
of some of our distributors.

Segment Information:

The Company did
not recognize revenue outside of the United States during the three months ended March 31, 2015 and 2014. The Company has two principal
business operations: (i) the distribution of proprietary medical foods and (ii) billing and collection services relating to our
products. The Company’s operations are organized into two reportable segments during the three months ended March 31, 2015
and 2014.

● TMP: The Company distributes
its proprietary medical foods and generic pharmaceuticals as PTL. TMP develops and distributes amino acid based therapeutic products
and distributes pharmaceutical products from other manufacturers through employed sales representatives, independent distributors
and pharmacies. TMP also performs the administrative, regulatory compliance, sales and marketing functions of the corporation,
owns the corporation’s intellectual property, is responsible for research and development relating to medical food products
and development of software used for the dispensation and billing of medical foods and generic products. The TMP segment also manages
contracts and chargebacks.

The accompanying consolidated
financial statements have been prepared on the basis that the Company will continue as a going concern. The Company has incurred
recurring losses and reported losses for the three months ended March 31, 2015, totaling $1,678,409 as well as an accumulated
deficit as of March 31, 2015, amounting to $28,595,825. As a result of our continued losses, at March 31, 2015, the Company’s
current liabilities significantly exceed current assets, resulting in negative working capital of $12,430,224. Further, the Company
does not have adequate cash to cover projected operating costs for the next 12 months. As of March 31, 2015, the Company also
owes approximately $400,000 to the Internal Revenue Service (“IRS”) and the California Franchise Tax
Board (“FTB”) for unpaid payroll taxes. These factors raise substantial doubt about the ability of the
Company to continue as a going concern. In order to ensure the continued viability of the Company, either future equity financings
must be obtained or profitable operations must be achieved in order to repay the existing short-term debt and to provide a sufficient
source of operating capital. No assurances can be made that the Company will be successful obtaining the equity financing needed
to continue to fund its operations, or that the Company will achieve profitable operations and positive cash flow. The consolidated
financial statements do not include any adjustments that might result from the outcome of these uncertainties.

The accompanying unaudited
consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and do
not include all the information and disclosures required by accounting principles generally accepted in the United States of America.
The Company has made estimates and judgments affecting the amounts reported in our consolidated financial statements and the accompanying
notes. The actual results experienced by the Company may differ materially from our estimates. The consolidated financial information
is unaudited but reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement
of results for the interim periods presented. The consolidated balance sheet as of December 31, 2014 was derived from the Company’s
audited financial statements. The consolidated financial statements should be read in conjunction with the consolidated financial
statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Results of the three months
ended March 31, 2015, are not necessarily indicative of the results to be expected for the full year ending December 31, 2015.

Principles of Consolidation

The consolidated financial
statements include accounts of TMP and its wholly owned subsidiary, CCPI (collectively referred to as “the Company”).
All significant intercompany accounts and transactions have been eliminated in consolidation. In addition, TMP and CCPI share the
common operating facility, certain employees and various costs. Such expenses are principally paid by TMP. Due to the nature of
the parent and subsidiary relationship, the individual financial position and operating results of TMP and CCPI may be different
from those that would have been obtained if they were autonomous.

Cash Equivalents

The Company considers all
highly liquid investments purchased with an original or remaining maturity of three months or less when purchased to be cash equivalents.
The recorded carrying amounts of the Company’s cash and cash equivalents approximate their fair value. As of March 31, 2015
and 2014, the Company had no cash equivalents.

Accounting Estimates

The preparation of financial
statements, in conformity with accounting principles generally accepted in the United States of America, requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
The Company’s critical accounting policies that involve significant judgment and estimates include revenue recognition, share
based compensation, recoverability of intangibles, valuation of derivatives, and valuation of deferred income taxes. Actual results
could differ from those estimates.

Revenue Recognition

TMP markets medical foods
and generic pharmaceuticals through employed sales representatives, independent distributors, and pharmacies. Product sales are
invoiced upon shipment at Average Wholesale Price (“AWP”), which is a commonly used term in the industry,
with varying rapid pay discounts, under five models: Physician Direct Sales, Distributor Direct Sales, Physician Managed, Hybrid
Models, and the Cambridge Medical Funding Group WC Receivable Purchase Assignment Model.

Under the following revenue
models, product sales are invoiced upon shipment. However, revenues are not recorded until collectability is reasonably assured,
which the Company has determined is when the payment is received:

Physician Direct Sales Model
(11% of product revenues for the three months ended March 31, 2015): Under this model, a physician purchases products from TMP,
but does not retain CCPI’s services. TMP invoices the physician upon shipment under terms which allow a significant rapid
pay discount off AWP for payment within discount terms, in accordance with the product purchase agreement. The physicians dispense
the product and perform their own claims processing and collections. TMP recognizes revenue under this model on the date of shipment
at the gross invoice amount less the anticipated rapid pay discount offered in the product purchase agreement. In the event payment
is not received within the term of the agreement, the amount due from the physician for the purchased TMP products reverts to the
AWP. In addition, if payment is not received within the agreed-upon term, a late payment fee of up to 20% may be applied to the
outstanding balance. The physician is responsible for payment directly to TMP.

Distributor Direct Sales Model
(25% of product revenues for the three months ended March 31, 2015): Under this model, a distributor purchases products from TMP,
sells those products to a physician, and the physician does not retain CCPI’s services. TMP invoices distributors upon shipment
under terms which include a significant discount off AWP. TMP recognizes revenue under this model on the date of shipment at the
net invoice amount. In the event payment is not received within the term of the agreement, the amount payable for the purchased
TMP products reverts to the AWP. In addition, if payment is not received within the agreed-upon term, a late payment fee of up
to 20% may be applied to the outstanding balance.

Physician Managed Model (23%
of product revenues for the three months ended March 31, 2015): Under this model, a physician purchases products from TMP and retains
CCPI’s services. TMP invoices the physician upon shipment under terms which allow a significant rapid pay discount for payment
received within terms in accordance with the product purchase agreement, which includes a security interest for TMP in the products
and receivables generated by the dispensing of the products. The physician also executes a billing and claims processing services
agreement with CCPI for billing and collection services relating to our products (discussed below). CCPI submits a claim for reimbursement
on behalf of the physician client. The CCPI fee and product invoice amount are deducted from the reimbursement received by CCPI
on behalf of the physician client before the reimbursement is forwarded to the physician client. In the event the physician fails
to pay the product invoice within the agreed term, we can deduct the payment due from any of the reimbursements received by us
on behalf of the physician client as a result of the security interest we obtained in the products we sold to the physician client
and the receivables generated by selling the products in accordance with our agreement. In the event payment is not received within
the term of the agreement, the amount due from the physician for the purchased TMP products reverts to the AWP. In addition, if
payment is not received within the agreed-upon term, a late payment fee of up to 20% may be applied to the outstanding balance.

Hybrid Model (15% of product
revenues for the three months ended March 31, 2015): Under this model, a distributor purchases products from TMP and sells those
products to a physician and the physician retains CCPI’s services. TMP invoices distributors upon shipment under terms which
allow a significant rapid pay discount for payment received within terms in accordance with the product purchase agreements. The
physician client of the distributor executes a billing and claims processing services agreement with CCPI for billing and collection
services (discussed below). The distributor product invoice and the CCPI fee are deducted from the reimbursement received by CCPI
on behalf of the physician client before the reimbursement is forwarded to the distributor for further delivery to their physician
clients. In the event payment is not received within the term of the agreement, the amount payable for the purchased TMP products
reverts to the AWP. In addition, if payment is not received within the agreed-upon term, a late payment fee of up to 20% may be
applied to the outstanding balance.

Since we are in the early stage
of our business, as a courtesy to our physician clients, our general practice has been to extend the rapid pay discount from our
Physician Managed and Hybrid models beyond the initial term of the invoice until the invoice is paid and not to apply a late payment
fee to the outstanding balance.

Due to substantial uncertainties
as to the timing and collectability of revenues derived from our Physician Managed and Hybrid models, which can take in excess
of five years to collect, we have determined that these revenues do not meet the criteria for recognition, in accordance with The
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic No. ASC 605, Revenue Recognition (“ASC 605”), upon shipment. These revenues are recorded
when collectability is reasonably assured, which the Company has determined is when the payment is received, which is upon collection
of the claim.

The Company has
entered into an agreement with Cambridge Medical Funding Group, LLC (“CMFG”) related to California Workers’
Compensation (“WC”) benefit claims. Under this arrangement, we have determined that pursuant to FASB
ASC Topic No. 860, Transfers of Financial Assets and ASC 605 we have met the criteria for revenue recognition on the date
that payment is due from CMFG, which approximates the product shipment date.

CMFG #1 – WC Receivable
Purchase Assignment Model (“CMFG #1”) (26% of product revenues for the three months ended March 31,
2015): Under this model, physicians who purchase products from TMP under the Company’s Physician Managed Model will have
the option to assign their accounts receivables (primarily those accounts receivables with dates of service starting with the year
2013) from California WC benefit claims to CMFG, at a discounted rate. Each agreement is executed among CMFG, TMP, and each individual
physician, and serves as a master agreement for all assigned receivables by the physician to CMFG. Since these accounts receivable
originated from the Company’s Physician Managed Model, CCPI’s services are also retained. The physician’s fees
and financial obligations due to TMP, for the purchase of TMP product and use of CCPI’s services, are satisfied directly
by CMFG, usually within seven (7) days of transmission of the accounts receivable to CMFG. CMFG has agreed to pay an amount equal
to 20% of eligible assigned accounts receivable as an advance payment. CMFG makes this payment directly to TMP, on behalf of the
physician. TMP applies this payment to the physician’s financial obligations due to CCPI for the physician’s use of
the Company’s medical billing and claims processing services, and the physician’s financial obligation due to TMP for
the cost of the product. The Company recognizes revenue on the date that payment is due from CMFG. Under CMFG #1, the Company only
receives the 20% advance payment, where such payment is without recourse or future obligation for TMP to repay the 20% advanced
amount back to CMFG or the physician. Actual amounts collected on the assigned accounts receivable are shared between CMFG and
the physician, where the first 37% of amounts collected are disbursed to CMFG and additional amounts collected are shared at a
ratio of 75:25, where 75% is disbursed to the physician and 25% is disbursed to CMFG.

During the three
months ended March 31, 2015 and 2014, the Company issued billings to Physician Managed and Hybrid model customers aggregating $0.7
million and $0.9 million, respectively, which were not recognized as revenues or accounts receivable in the accompanying consolidated
financial statements at the time of such billings. Direct costs associated with the above billings are expensed as incurred. Direct
costs associated with all billings, aggregating $121,856 and $139,319, respectively, were expensed in the accompanying consolidated
financial statements at the time of such billings. In accordance with the Company’s revenue recognition policy, the Company
recognized revenues from certain of these customers when cash was collected, aggregating $351,897 and $667,855 during the three
months ended March 31, 2015 and 2014, respectively. As of March 31, 2015, we had approximately $7.2 million in unrecorded accounts
receivable that potentially will be recorded as revenue in the future as our CCPI subsidiary secures claims payments on behalf
of our PMM and Hybrid Customers. All unpaid invoices underlying claims assigned to CMFG pursuant to CMFG #1 are excluded from unrecorded
accounts receivable.

CCPI receives no
revenue in the Physician Direct or Distributor Direct models because it does not provide collection and billing services to these
customers. In the Physician Managed and Hybrid models CCPI has a billing and claims processing service agreement with the physician.
The billing and claims processing agreement includes a service fee that is based upon a percentage of collections on all claims.
Because fees are only earned by CCPI upon collection of the claim, and the fee is not determinable until the amount of the collection
of the claim is known, CCPI recognizes revenue at the time claims are paid. Under CMFG #1 the Company recognizes revenue related
to CCPI’s services upon receipt of the 20% advance payment from CMFG.

No returns of products
are allowed except for products damaged in shipment, which historically have been insignificant.

The rapid pay discounts
to the AWP amount offered to the physician or distributor vary based upon the expected payment term from the physician or distributor.
The discounts are derived from the Company’s historical experience of the collection rates from internal sources and updated
for facts and circumstances and known trends and conditions in the industry, as appropriate. As described in the various models,
we recognize provisions for rapid pay discounts in the same period in which the related revenue is recorded. We believe that our
current provisions appropriately reflect our exposure for rapid pay discounts. These rapid pay discounts have typically ranged
from 40% to 88% of AWP.

Allowance for Doubtful Accounts

Trade accounts receivable
are stated at the amount management expects to collect from outstanding balances. Currently, accounts receivable are comprised
of amounts due from our CMFG #1, distributor customers and other miscellaneous receivables. The carrying amounts of accounts receivable
are reduced by an allowance for doubtful accounts that reflects management’s best estimate of the amounts that will not be
collected. The Company individually reviews all accounts receivable balances and based upon an assessment of current creditworthiness,
estimates the portion, if any, of the balance that will not be collected. An allowance is recorded for those accounts that
are determined to likely be uncollectible through a charge to earnings and a credit to a valuation allowance. Balances that
remain outstanding after we have used reasonable collection efforts will be written off. Based on an assessment as of March 31,
2015 and December 31, 2014, of the collectability of invoices, we established an allowance for doubtful accounts of $55,773.

Under the Company’s
Physician Managed Model and Hybrid Model, CCPI performs billing and collection services on behalf of the physician client and deducts
the CCPI fee and product invoice amount from the reimbursement received by CCPI on behalf of the physician client before the reimbursement
is forwarded to the physician client. Extended collection periods are typical in the workers compensation industry with payment
terms extending from 45 days to in excess of five years. The physician remains personally liable for purchases of product from
TMP and TMP retains a security interest in all products sold to the physician, and the resulting claims receivable from sales of
the products. CCPI maintains an accounting of all managed accounts receivable on behalf of the physician. As described above, due
to uncertainties as to the timing and collectability of revenues derived from these models, revenue is recorded when payment is
received, there is no related accounts receivable, and therefore no allowance for doubtful accounts is necessary.

Inventory Valuation

Inventory is valued
at the lower of cost (first in, first out) or market and consists primarily of medical food products.

Property and Equipment

Property and equipment
are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets.
Computer equipment is depreciated over three to five years. Furniture and fixtures are depreciated over five to seven years. Leasehold
improvements are amortized over the shorter of fifteen years or term of the applicable property lease. Maintenance and repairs
are expensed as incurred; major renewals and betterments that extend the useful lives of property and equipment are capitalized.
When property and equipment is sold or retired, the related cost and accumulated depreciation are removed from the accounts and
any gain or loss is recognized. Amenities are capitalized as leasehold improvements.

Impairment of Long-Lived Assets

The long-lived assets
held and used by the Company are reviewed for impairment no less frequently than annually or whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that the
cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. No impairment indicators existed at
March 31, 2015 and December 31, 2014, so no long-lived asset impairment was recorded.

Intangible Assets

Intangible assets
with finite lives, including patents and internally developed software (primarily the Company’s PDRx Software), are stated
at cost and are amortized over their useful lives. Patents are amortized on a straight line basis over their statutory lives, usually
fifteen to twenty years. Internally developed software is amortized over three to five years. Intangible assets with indefinite
lives are tested annually for impairment, during the fiscal fourth quarter and between annual periods, and more often when events
indicate that an impairment may exist. If impairment indicators exist, the intangible assets are written down to fair value as
required. The Company has one intangible asset with an indefinite life which is a domain name for medical foods. Taking into account
the cyclical and non-recurring events that effected operations, the Company determined that no impairment indicators existed at
March 31, 2015, or December 31, 2014, so no intangible asset impairment was recorded for the three months ended March 31, 2015,
or the year ended December 31, 2014.

Fair Value of Financial Instruments

The Company’s
financial instruments are accounts receivable, accounts payable, notes payable, and warrant derivative liability. The recorded
values of accounts receivable and accounts payable approximate their values based on their short term nature. Notes payable are
recorded at their issue value or if warrants are attached at their issue value less the proportionate value of the warrant. Warrants
issued with ratcheting provisions are classified as derivative liabilities and are revalued using the Black-Scholes model each
quarter based on changes in the market value of our common stock and unobservable level 3 inputs.

The Company defines
fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable
inputs. The fair value hierarchy is based on three levels of inputs that may be used to measure fair value, of which the first
two are considered observable and the last is considered unobservable:

Level 2: Inputs other than Level 1 that
are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets
that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the
full term of the assets or liabilities.

Level 3: assumptions: Unobservable inputs
that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities including
liabilities resulting from imbedded derivatives associated with certain warrants to purchase common stock.

Derivative Financial Instruments

Derivative liabilities
are recognized in the consolidated balance sheets at fair value based on the criteria specified in FASB ASC Topic 815-40 Derivatives
and Hedging – Contracts in Entity’s own Equity (“ASC 815-40”). Pursuant to ASC 815-40,
an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required
to be classified as a derivative liability instead of as equity. The estimated fair value of warrants classified as derivative
liabilities is determined using the Black-Scholes option pricing model. The model utilizes Level 3 unobservable inputs to calculate
the fair value of the warrants at each reporting period. The Company determined that using an alternative valuation model such
as a Binomial-Lattice model would result in minimal differences. The fair value of warrants classified as derivative liabilities
is adjusted for changes in fair value at each reporting period, and the corresponding non-cash gain or loss is recorded as other
income or expense in the consolidated statement of operations. As of March 31, 2015, 95,000 warrants were classified as derivative
liabilities. Each reporting period the warrants are re-valued and adjusted through the caption “change in fair value of warrant
liability” on the consolidated statements of operations. The Company’s remaining warrants are recorded to additional
paid in capital as equity instruments.

Income Taxes

The Company determines
its income taxes under the asset and liability method. Under the asset and liability approach, deferred income tax assets and liabilities
are calculated and recorded based upon the future tax consequences of temporary differences by applying enacted statutory tax rates
applicable to future periods for differences between the financial statements carrying amounts and the tax basis of existing assets
and liabilities. Generally, deferred income taxes are classified as current or non-current in accordance with the classification
of the related asset or liability. Those not related to an asset or liability are classified as current or non-current depending
on the periods in which the temporary differences are expected to reverse. Valuation allowances are provided for significant deferred
income tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company recognizes
tax liabilities by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit
is recognized and also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The minimum threshold is defined as a tax position that is more likely than not to
be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes,
based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that
is greater than fifty percent likely of being realized upon ultimate settlement. To the extent that the final tax outcome of these
matters is different than the amount recorded, such differences impact income tax expense in the period in which such determination
is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax
expense. U.S. GAAP also requires management to evaluate tax positions taken by the Company and recognize a liability if the Company
has taken uncertain tax positions that more likely than not would not be sustained upon examination by applicable taxing authorities.
Management of the Company has evaluated tax positions taken by the Company and has concluded that as of March 31, 2015, there are
no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability that would require disclosure
in the financial statements.

The Company’s
effective tax rates were 0% for the three months ended March 31, 2015 and 2014. During the quarter ended June 30, 2013, the
Company decided to fully reserve its net deferred income tax assets by taking a full valuation allowance against these assets.
As a result of this decision, during the three months ended March 31, 2015 and 2014, the Company did not recognize any income tax
benefit as a result of its net loss. Thus, during the three months ended March 31, 2015 and 2014, the effective tax rate differed
from the U.S. federal statutory rate due to the change in the valuation allowance. The table below shows the balances for the deferred
income tax assets and liabilities as of the dates indicated.

March 31, 2015

December 31, 2014

Deferred income tax asset-short-term

$

1,604,903

$

1,517,270

Allowance

(1,604,903

)

(1,517,270

)

Deferred income tax asset-short-term, net

—

—

Deferred income tax asset-long-term

8,803,644

8,303,462

Deferred income tax liability-long-term

(1,024,649

)

(1,074,928

)

Deferred income tax asset-long-term

7,778,995

7,228,534

Allowance

(7,778,995

)

(7,228,534

)

Deferred income tax asset-long-term, net

—

—

Total deferred tax asset, net

$

—

$

—

The ultimate realization
of deferred tax assets is dependent upon the existence, or generation, of taxable income in the periods when those temporary differences
and net operating loss carryovers are deductible. Management considers the scheduled reversal of deferred tax liabilities, taxes
paid in carryover years, projected future taxable income, available tax planning strategies, and other factors in making this assessment.
Based on available evidence, management believes it is more likely than not that all of the deferred tax assets will not be realized.
Accordingly, the Company has maintained a valuation allowance for the current year.

At March 31, 2015,
the Company had total domestic Federal and state net operating loss carryovers of approximately $9,149,000 and $11,942,000, respectively.
Federal and state net operating loss carryovers expire at various dates between 2021 and 2032.

Under the Tax Reform
Act of 1986, as amended, the amounts of and benefits from net operating loss carryovers and research and development credits may
be impaired or limited in certain circumstances. Events which cause limitations in the amount of net operating losses that the
Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50%, as defined,
over a three year period. The Company does not believe that such an ownership change has occurred.

Stock-Based Compensation

The Company accounts
for stock option awards in accordance with FASB ASC Topic No. 718, Compensation-Stock Compensation. Under FASB ASC Topic
No. 718, compensation expense related to stock-based payments is recorded over the requisite service period based on the grant
date fair value of the awards. Compensation previously recorded for unvested stock options that are forfeited is reversed upon
forfeiture. The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards.
The Black-Scholes model requires the use of assumptions which determine the fair value of stock-based awards, including the option’s
expected term and the price volatility of the underlying stock.

The Company’s
accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions
of FASB ASC Topic No. 505-50, Equity Based Payments to Non-Employees. Accordingly, the measurement date for the fair value
of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant
or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity
instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

Loss per Common Share

The Company utilizes
FASB ASC Topic No. 260, Earnings per Share. Basic loss per share is computed by dividing loss available to common shareholders
by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share
except that the denominator is increased to include the number of additional common shares that would have been outstanding if
the potential common shares had been issued and if the additional common shares were dilutive. Diluted loss per common share reflects
the potential dilution that could occur if convertible debentures, options and warrants were to be exercised or converted or otherwise
resulted in the issuance of common stock that then shared in the earnings of the entity.

Since the effects
of outstanding options, warrants and the conversion of convertible debt are anti-dilutive in all periods presented, shares of common
stock underlying these instruments have been excluded from the computation of loss per common share.

The following sets
forth the number of shares of common stock underlying outstanding options, warrants and convertible debt as of March 31, 2015 and
2014:

March 31,

2015

2014

Warrants

4,699,372

4,256,465

Stock options

2,420,241

2,424,241

Convertible debentures

2,166,667

-

9,286,280

6,680,706

Research and Development

Research and development
costs are expensed as incurred. In instances where we enter into agreements with third parties for research and development activities,
we may prepay fees for services at the initiation of the contract. We record the prepayment as a prepaid asset and amortize the
asset into research and development expense over the period of time the contracted research and development services are performed.
Typically, we expensed 50% of the contract amount within the first two years of the contract and 50% over the remainder of the
record retention requirements under the contract based on our experience on how long the clinical trial service is provided.

Reclassifications

Certain prior year amounts
have been reclassified for comparative purposes to conform to the current-year financial statement presentation. These reclassifications
had no effect on previously reported results of operations.

Recent Accounting Pronouncements

In May 2014, the FASB
issued Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts with Customers (Topic 606)”
which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition.
The purpose of ASU 2014-09 is to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S.
GAAP and International Financial Reporting Standards. The amendments (i) remove inconsistencies and weaknesses in revenue
requirements, (ii) provide a more robust framework for addressing revenue issues, (iii) improve comparability of revenue recognition
across entities, industries, jurisdictions, and capital markets, (iv) provide more useful information to users of financial statements
through improved disclosure requirements, and (v) simplify the preparation of financial statements by reducing the number of requirements
to which an entity must refer. The new revenue recognition standard requires entities to recognize revenue in a way that
reflects the transfer of promised goods or services to customers in an amount based on the consideration to which the entity expects
to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for interim and annual reporting periods beginning
after December 15, 2016 and early adoption is not permitted. The amendments can be applied retrospectively to each prior
reporting period or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial
application. The Company has not determined what transition method it will use and is currently assessing the impact
that this guidance may have on its consolidated financial statements.

In August 2014, the FASB
issued ASU No. 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties
about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 is intended to define management’s
responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and
to provide related footnote disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016,
and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The
adoption of this standard is not expected to have a material effect on the Company’s operating results or financial condition.

In January 2011 the Company’s
stockholders approved the Company’s 2011 Stock Incentive Plan (the “Plan”), which provided for
the issuance of a maximum of three million (3,000,000) shares of the Company’s common stock to be offered to the Company’s
directors, officers, employees, and consultants. On August 26, 2013, the Company’s Board of Directors approved a two million
(2,000,000) share increase in the number of shares issuable under the Plan, which was approved by the Company’s stockholders
on June 6, 2014. Options granted under the Plan have an exercise price equal to or greater than the fair value of the underlying
common stock at the date of grant and become exercisable based on a vesting schedule determined at the date of grant. The
options expire between 5 and 10 years from the date of grant. Restricted stock awards granted under the Plan are subject to
a vesting period determined at the date of grant.

During the three months
ended March 31, 2015, the Company had stock-based compensation expense of $8,663, related to issuances to the Company’s employees
and directors, included in reported net loss. During the three months ended March 31, 2014, the Company had stock-based compensation
expense included in reported net loss of $12,451. The total amount of stock-based compensation to employees and directors for the
three months ended March 31, 2015 and 2014, related solely to the issuance of stock options.

A
summary of stock option activity for the three months ended March 31, 2015 and year ended December 31, 2014, is presented below:

Outstanding Options

Shares Available for Grant

Number of Shares

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life (years)

Aggregate Intrinsic Value

December 31, 2013

1,792,697

2,794,841

$

1.89

7.03

$

0

Cancellations and forfeitures

373,800

(373,800

)

$

2.62

Restricted stock awards

(75,000

)

—

December 31, 2014

2,091,497

2,421,041

$

1.77

5.88

$

0

Cancellations and forfeitures

800

(800

)

$

1.50

March 31, 2015

2,092,297

2,420,241

$

1.77

5.63

$

0

The
aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e., the difference between our closing
stock price on the respective date and the exercise price, times the number of shares) that would have been received by the option
holders had all option holders exercised their options. There have not been any options exercised during the three months ended
March 31, 2015 and year ended December 31, 2014.

All options that the Company
grants are granted at the per share fair value on the grant date. Vesting of options differs based on the terms of each option.
The Company has valued the options at their date of grant utilizing the Black Scholes option pricing model. As of the issuance
of these financial statements, there was not an active public market for the Company’s shares. Accordingly, the fair value
of the underlying options was determined based on the historical volatility data of similar companies, considering the industry,
products and market capitalization of such other entities. The risk-free interest rate used in the calculations is based on the
implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options as calculated
using the simplified method. The expected life of the options used was based on the contractual life of the option granted. Stock-based
compensation is a non-cash expense because we settle these obligations by issuing shares of our common stock from our authorized
shares instead of settling such obligations with cash payments.

The Company utilized the
Black-Scholes option pricing model. The Company did not issue any options during the three months ended March 31, 2015 or the year
ended December 31, 2014.

A summary of the changes
in the Company’s nonvested options during the three months ended March 31, 2015, is as follows:

Number ofNon-vestedOptions

WeightedAverage FairValue at GrantDate

Intrinsic Value

Non-vested at December 31, 2014

170,833

$

0.57

$

—

Vested in three months ended March 31, 2015

25,000

$

0.93

$

—

Non-vested at March 31, 2015

145,833

$

0.51

$

—

Exercisable at March 31, 2015

2,274,408

$

0.93

$

—

Outstanding at March 31, 2015

2,420,241

$

0.91

$

—

As of March 31, 2015,
total unrecognized compensation cost related to unvested stock options was $53,913. The cost is expected to be recognized over
a weighted average period of 2.16 years.

During the year ended December
31, 2014, the Company issued a total of 662,907 warrants, at an average exercise price of $0.35 per share. Included in these issuances
are 162,907 warrants issued to William E. Shell, M.D., the Company’s former Chief Executive Officer, in connection with the
July 24, 2014 loan to the Company (See Note 7), and 500,000 warrants to several consultants for financial advisory and investor
relations services. During the three months ended March 31, 2015, the Company did not issue any warrants and cancelled 220,000
warrants, with an average exercise price of $0.42 per share.

The Company utilized the
Black-Scholes option pricing model and the assumptions used for the year ended December 31, 2014 are as follows:

Year Ended

December 31, 2014

Weighted average risk free interest rate

1.67% – 1.72%

Weighted average life (in years)

5.0

Volatility

67

%

Expected dividend yield

0

%

Weighted average grant-date fair value per share of options granted

$

0.67

The following table summarizes
information about common stock warrants outstanding at March 31, 2015:

Outstanding

Exercisable

Weighted

Average

Weighted

Weighted

Remaining

Average

Average

Exercise

Number

Contractual

Exercise

Number

Exercise

Price

Outstanding

Life (Years)

Price

Exercisable

Price

$

0.01

365,000

3.80

$

0.01

365,000

$

0.01

$

0.80

162,907

4.37

$

0.80

162,907

$

0.80

$

1.00

1,625,000

2.33

$

1.00

1,625,000

$

1.00

$

2.00

1,812,500

8.30

$

2.00

1,812,500

$

2.00

$

2.60

20,000

3.10

$

2.60

20,000

$

2.60

$

3.38

713,965

1.82

$

3.38

713,965

$

3.38

$

0.01 - 3.38

4,699,372

4.74

$

1.67

4,699,372

$

1.67

Included in the Company’s
outstanding warrants are 2,586,872 warrants that were issued to a related party over the period from August 2011 through July
2014 at exercise prices ranging from $0.01 to $3.38. One of the related party warrants contains provisions that require it to
be accounted for as a derivative security. As of March 31, 2015 and December 31, 2014, the value of the related liability was
$18,065 and $18,075, respectively. Changes in these values are recorded as income or expense during the reporting period that
the change occurs.

Notes payable at March 31, 2015, and December
31, 2014, are comprised of the following:

March 31, 2015

December 31, 2014

Notes payable to William Shell Survivor’s Trust (a)

$

1,874,411

$

1,874,411

Notes payable to William Shell (b)

130,000

130,000

Notes payable to Lisa Liebman (c)

500,000

500,000

Note payable to Cambridge Medical Funding Group, LLC (d)

1,398,559

1,523,559

Note payable to Derma Medical Systems, Inc. (e)

650,000

—

Note payable to Shlomo Rechnitz (f)

1,151,890

—

Total notes payable

5,704,860

4,027,970

Less: debt discount

(350,609

)

(308,507

)

5,354,251

3,719,463

Less: current portion

(4,261,572

)

(3,597,173

)

Notes payable – long-term portion

$

1,092,679

$

122,290

(a)

Between January 2011 and December 2012, William E. Shell, M.D., the Company’s former Chief Executive Officer, former Chief Scientific Officer, greater than 10% shareholder and a former director, loaned $5,132,334 to the Company. As consideration for the loans, the Company issued promissory notes in the aggregate principal amount of (i) $4,982,334 to the Elizabeth Charuvastra and William Shell Family Trust dated July 27, 2006 and amended September 29, 2006 (the “Family Trust”), and (ii) $150,000 to the William Shell Survivor’s Trust (the “Survivor’s Trust”). At the time these promissory notes were issued, all of these notes were issued with maturity dates of five years from the date of issuance with interest payable on the maturity date. On June 22, 2012, the Company’s Board of Directors ratified an amendment that modified all promissory notes that were issued prior to June 22, 2012 to demand notes with interest payable quarterly (the “June 2012 Amendment”). The Company disputes the validity of the June 2012 Amendment. On December 21, 2012, all notes issued to the Family Trust were assigned to the Survivor’s Trust (the “WS Trust Notes”) which in turn assigned certain promissory notes, in the aggregate principal amount of $500,000, to Lisa Liebman. The WS Trust Notes accrue interest at rates ranging between 3.25% and 12.0% per annum.

During the three months ended March
31, 2015 and 2014, the Company incurred interest expense of $21,373 and $22,136, respectively, on the WS Trust Notes. At March
31, 2015 and December 31, 2014, accrued interest on the WS Trust Notes totaled $42,689 and 21,316, respectively.

On March 13, 2015, we received from
counsel for Dr. Shell, Ms. Liebman, the Elizabeth Charuvastra and William Shell Family Trust dated July 27, 2006 and amended September
29, 2006 (the “Family Trust”) and the William Shell Survivor’s Trust (the “Survivor’s
Trust”), a written demand for repayment of all principal and interest outstanding on all outstanding notes. The Company
disputes the enforceability of the demand.

(b)

On July 24, 2014, Dr. Shell loaned $130,000 to the Company. As consideration for the loan, the Company issued Dr. Shell a promissory note in the aggregate principal amount of $130,000 (the “Shell Note”). The Shell Note accrues interest at the rate of 8% per annum and is payable on demand. As additional consideration for entering into the loan agreement, Dr. Shell received 162,907 warrants to purchase shares of the Company’s common stock at an exercise price of $0.798 per share (the “Shell Warrant”). The Company recorded a debt discount in the amount of $44,867 based on the estimated fair value of the Shell Warrant. The debt discount was amortized as non-cash interest expense on the date of issuance using the effective interest method. During the three months ended March 31, 2015, the Company incurred interest expense of $2,564 on the Shell Note. At March 31, 2015 and December 31, 2014, accrued interest on the Shell Note totaled $4,502 and $1,938, respectively.

(c)

On December 21, 2012 the William Shell Survivor’s Trust assigned certain promissory notes, in the aggregate principal amount of $500,000, to Lisa Liebman (the “Liebman Notes”), a related party. Lisa Liebman is married to Dr. Shell. The Liebman Notes accrue interest at rates ranging between 3.25% and 3.95% per annum. The Liebman Notes were included in the disputed June 2012 Amendment. The principal and interest on the Liebman Notes is reflected as payable on demand. During both the three months ended March 31, 2015 and 2014, the Company incurred interest expense on the Liebman Notes of $4,732. At March 31, 2015 and December 31, 2014, accrued interest on the Liebman Notes totaled $9,569 and $4,837, respectively.

(d)

On June 28, 2013, the Company entered into an arrangement with CMFG which was governed pursuant to the terms of four contemporaneous agreements. On October 1, 2013, CMFG assigned its rights pursuant to the Workers’ Compensation Receivables Funding, Assignment and Security Agreement, to Raven Asset-Based Opportunity Fund I LP, a Delaware limited partnership (“Raven”). The components of the agreements are detailed as follows:

●

Workers’ Compensation Receivables Funding, Assignment and Security Agreement, as amended (“CMFG #2”) – The Company has assigned the future proceeds of accounts receivable of WC benefit claims with dates of service between the year 2007 and December 31, 2012 (the “Funded Receivables”), to Raven. In exchange, the Company received a loan of $3.2 million. Prior to July 1, 2014, the monthly division of collections on Funded Receivables was distributed as follows: First, to CMFG as a servicing fee in an amount equal to five percent (5%) of the collections; Second, to Raven to pay off any shortfalls from previous months (a shortfall will have been deemed to occur if Raven receives less than $175,000 in a given month); Third, to Raven in an amount up to $175,000; Fourth, to the Company in an amount of $125,000; Fifth, to Raven and the Company, the remainder of the Funded Receivables split at a ratio of 50% to 50%. Effective July 1, 2014, the monthly division of collections on the Funded Receivables was modified and until such time as Raven has received payment of $3.95 million in collections from Funded Receivables, the Funded Receivables will be distributed as follows: First, to CMFG as a servicing fee in an amount equal to five percent (5%) of the collections; Second, to Raven to pay off any shortfalls from previous months (a shortfall will have been deemed to occur if Raven receives less than $125,000 in a given month); Third, to Raven in an amount up to $125,000; Fourth, to the Company in an amount of $125,000; Fifth, to Raven and the Company, the remainder of the Funded Receivables split at a ratio of 50% to 50%. Once Raven has received payment of $3.95 million in collections from Funded Receivables, the Funded Receivables will cease to be distributed as described above, and will instead be distributed as follows: First, to CMFG as a servicing fee in an amount equal to five percent (5%) of the collections; and Second, to Raven and the Company, the remainder of the Funded Receivables split at a ratio of 45% to 55%, respectively.

●

Common Stock Warrant to James Giordano, CEO of CMFG – The Company issued a ten (10) year warrant to purchase 1,412,500 shares of common stock at an exercise price of $2.00 per share (the “Giordano Warrant”) as consideration for consulting services performed by Mr. Giordano, as described below. The warrants became exercisable during December 2013. The exercisable amount is limited to the average trading volume for the ten days prior to the date of exercise.

●

Professional Services and Consulting Agreement with Mr. Giordano – The Company entered into a consulting arrangement with Mr. Giordano for consulting services relating to medical receivable billing, billing/management strategies, and areas related to financing. Mr. Giordano’s only form of compensation for his consulting services was the issuance of the Giordano Warrant. The consulting agreement terminates at such time as all the obligations or contemplated transactions detailed in the Giordano Warrant have been satisfied.

●

Professional Services and Consulting Agreement with CMFG – The Company entered into a consulting arrangement with CMFG for consulting services relating to medical receivable billing, billing/management strategies, and areas related to financing. The agreement provided for the Company to pay a one-time fee of $64,000 upon execution of the agreement.

As additional consideration,
Raven received a warrant to purchase 400,000 shares of the Company’s common stock at an exercise price of $2.00 per share
(the “Raven Warrant”)(See Note 5). The warrants became exercisable April 1, 2014. However, the exercisable
amount is limited to the average trading volume for the ten days prior to the date of exercise. The Company accounted for the additional
issuance of warrants as a modification of the original award issued June 28, 2013.

The Company recorded a
debt discount in the amount of $925,521 based on the estimated fair value of the Giordano and Raven Warrants. The debt discount
is being amortized as non-cash interest expense over the term of the debt using the effective interest method. During the three
months ended March 31, 2015 and 2014, interest expense of $77,127 and $115,690, respectively, was recorded from the debt discount
amortization.

During the three months
ended March 31, 2015 and 2014, the Company incurred interest expense, excluding amortization of debt discount, of $86,680 and $98,970,
respectively, pursuant to CMFG #2.

(e)

On January 13, 2015, the Company entered into
a securities purchase agreement, pursuant to which the Company sold a senior secured convertible debenture (the “Debenture”)
in the principal amount of $650,000, to Derma Medical Systems, Inc. (“Derma”). Thomas R. Wenkart, M.D.,
a director of the Company, is the owner and President of Derma. The Debenture accrues interest at 4% per annum, throughout the
term of the Debenture, and unless earlier converted into shares of the Company’s common stock, has a maturity date of January
12, 2018. Interest on the Debenture is paid semi-annually, at the Company’s option, in either cash or shares of common stock.
At Derma’s option, the principal amount of the Debenture is convertible into shares of common stock at a conversion price
of $0.30, subject to adjustment. If, at any time while the Debenture is outstanding, the Company sells or grants any option to
purchase or sells or grants any right to reprice, or otherwise disposes of or issues, any Common Stock or Common Stock equivalents
entitling any person to acquire shares of Common Stock at an effective price per share that is lower than the conversion price
(such issuances, collectively, a “Dilutive Issuance”), then the conversion price shall be reduced and
only reduced by multiplying the conversion price by a fraction, the numerator of which is the number of shares of Common Stock
issued and outstanding immediately prior to the Dilutive Issuance plus the number of shares of Common Stock which the offering
price for such Dilutive Issuance would purchase at the then conversion price, and the denominator of which shall be the sum of
the number of shares of Common Stock issued and outstanding immediately prior to the Dilutive Issuance plus the number of shares
of Common Stock so issued or issuable in connection with the Dilutive Issuance.

The debt conversion feature embedded in the
Debenture is accounted for under ASC Topic 815 – Derivatives and Hedging. At issuance, the fair value of the debt
conversion feature totaled $119,229 on the Debenture. The fair value of the debt conversion feature was allocated from the gross
proceeds of the Debenture and the respective discount will be amortized to interest expense over the term of the Debenture using
the effective interest method. The valuation of the bifurcated debt conversion feature was valued at their date of grant utilizing
the Black Scholes option pricing model.

During the three months ended March 31, 2015,
the Company incurred interest expense of $5,485 on the Debenture. At March 31, 2015, accrued interest on the Debenture totaled
$5,485.

(f)

On February 23, 2015, Shlomo Rechnitz loaned $1.2 million to the Company. As consideration for the loan, the Company issued Mr. Rechnitz a promissory note in the aggregate principal amount of $1.2 million (the “Rechnitz Note”). The Rechnitz Note accrues interest at 4% per annum, throughout its term, and has a maturity date of February 22, 2017. Principal and interest on the Rechnitz Note is payable in monthly installments of $52,109.91, beginning on March 22, 2015, and continuing until February 22, 2017. During the three months ended March 31, 2015, the Company incurred interest expense of $4,734 on the Rechnitz Note. At March 31, 2015, accrued interest on the Rechnitz Note totaled $734.

As of March 31, 2015,
and December 31, 2014, the Company has notes payable agreements issued to related parties with aggregate outstanding principal
balances of $3,154,411 and $2,504,411, respectively (See Note 7).

On March 21, 2014, the
Company entered into a subscription agreement with Ultera Pty Ltd ATF MPS Superannuation Fund (“Ultera”).
Dr. Wenkart, a director of the Company, is the owner and director of Ultera. The Company issued and sold to Ultera 400,000 shares
of its common stock. The issuance resulted in aggregate gross proceeds to the Company of $240,000.

During the year ended
December 31, 2014, the Company issued an aggregate of 627,575 shares of its common stock pursuant to agreements with its directors
and consultants to the Company. The shares were valued at $398,750, an average of $0.64 per share.

The Company is a party
to various legal proceedings. At present, the Company believes that the ultimate outcome of these proceedings, individually and
in the aggregate, will not materially harm our financial position, results of operations, cash flows, or overall trends. However,
legal proceedings are subject to inherent uncertainties, and unfavorable rulings or other events could occur. Unfavorable resolutions
could include substantial monetary damages. Were unfavorable resolutions to occur, the possibility exists for a material adverse
impact on our business, results of operations, financial position, and overall trends. Management might also conclude that settling
one or more such matters is in the best interests of our stockholders, employees, and customers, and any such settlement could
include substantial payments. However, the Company has not reached this conclusion with respect to any particular ongoing matter
at this time.

On March 13, 2015, we received
from counsel for Dr. Shell, Ms. Liebman, the Elizabeth Charuvastra and William Shell Family Trust dated July 27, 2006 and amended
September 29, 2006 (the “Family Trust”) and the William Shell Survivor’s Trust (the “Survivor’s
Trust”), a written demand for repayment of all principal and interest outstanding on all outstanding notes. The Company
disputes the enforceability of the demand.

On March 18, 2015, an interim
award in the amount of $1.17 million dollars was issued against TMP for breach of contract, and in favor of PDR Medical Management,
LLC, a California Limited Liability Company (“PDR”), a former distributor of the Company’s products,
at an Arbitration through JAMS. The amount of the award was for sums previously included in the Company’s financial
statements as “Due to Physicians” (See Note 6). A final award was issued on April 27, 2015, that awarded an additional
$333,274 to PDR for attorneys’ fees, costs and prejudgment interest which is included in accrued liabilities in the accompanying
consolidated balance sheet.

Leases

The Company leases its
operating facility under a lease agreement expiring February 28, 2018 at the rate of $21,007 per month. The Company, as lessee,
is required to pay for all insurance, repairs and maintenance and any increases in real property taxes over the lease period.

On March 13, 2015, we received
from counsel for Dr. Shell, Ms. Liebman, the Family Trust and the Survivor’s Trust, a written demand for repayment of all
principal and interest outstanding on all outstanding notes. The Company disputed the enforceability of the demand. On April 27,
2015, Dr. Shell, Ms. Liebman and the Survivor’s Trust filed suit in Superior Court of California, County of Los Angeles,
for repayment of all principal and interest outstanding. Additionally, between June 4, 2013, and November 25, 2013, the William
Shell Survivor’s Trust converted $2,000,000 of its notes into 1,769,629 shares of the Company’s common stock. The complaint
now alleges that the conversion of $2,000,000 in notes held by the Survivor’s Trust did not occur.

On May 13, 2015, we received
from counsel for Dr. Shell, a written demand for arbitration primarily related to unpaid compensation Dr. Shell claims he is due.
The demand is seeking an award of $1.9 million.

The accompanying unaudited
consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X and do
not include all the information and disclosures required by accounting principles generally accepted in the United States of America.
The Company has made estimates and judgments affecting the amounts reported in our consolidated financial statements and the accompanying
notes. The actual results experienced by the Company may differ materially from our estimates. The consolidated financial information
is unaudited but reflects all normal adjustments that are, in the opinion of management, necessary to provide a fair statement
of results for the interim periods presented. The consolidated balance sheet as of December 31, 2014 was derived from the Company’s
audited financial statements. The consolidated financial statements should be read in conjunction with the consolidated financial
statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014. Results of the three months
ended March 31, 2015, are not necessarily indicative of the results to be expected for the full year ending December 31, 2015.

The consolidated financial
statements include accounts of TMP and its wholly owned subsidiary, CCPI (collectively referred to as “the Company”).
All significant intercompany accounts and transactions have been eliminated in consolidation. In addition, TMP and CCPI share
the common operating facility, certain employees and various costs. Such expenses are principally paid by TMP. Due to the nature
of the parent and subsidiary relationship, the individual financial position and operating results of TMP and CCPI may be different
from those that would have been obtained if they were autonomous.

The Company considers
all highly liquid investments purchased with an original or remaining maturity of three months or less when purchased to be cash
equivalents. The recorded carrying amounts of the Company’s cash and cash equivalents approximate their fair value. As of
March 31, 2015 and 2014, the Company had no cash equivalents.

The preparation of financial
statements, in conformity with accounting principles generally accepted in the United States of America, requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. The Company’s critical accounting policies that involve significant judgment and estimates include revenue recognition,
share based compensation, recoverability of intangibles, valuation of derivatives, and valuation of deferred income taxes. Actual
results could differ from those estimates.

TMP markets medical foods
and generic pharmaceuticals through employed sales representatives, independent distributors, and pharmacies. Product sales are
invoiced upon shipment at Average Wholesale Price (“AWP”), which is a commonly used term in the industry,
with varying rapid pay discounts, under five models: Physician Direct Sales, Distributor Direct Sales, Physician Managed, Hybrid
Models, and the Cambridge Medical Funding Group WC Receivable Purchase Assignment Model.

Under the following revenue
models, product sales are invoiced upon shipment. However, revenues are not recorded until collectability is reasonably assured,
which the Company has determined is when the payment is received:

Physician Direct Sales Model
(11% of product revenues for the three months ended March 31, 2015): Under this model, a physician purchases products from TMP,
but does not retain CCPI’s services. TMP invoices the physician upon shipment under terms which allow a significant rapid
pay discount off AWP for payment within discount terms, in accordance with the product purchase agreement. The physicians dispense
the product and perform their own claims processing and collections. TMP recognizes revenue under this model on the date of shipment
at the gross invoice amount less the anticipated rapid pay discount offered in the product purchase agreement. In the event payment
is not received within the term of the agreement, the amount due from the physician for the purchased TMP products reverts to the
AWP. In addition, if payment is not received within the agreed-upon term, a late payment fee of up to 20% may be applied to the
outstanding balance. The physician is responsible for payment directly to TMP.

Distributor Direct Sales Model
(25% of product revenues for the three months ended March 31, 2015): Under this model, a distributor purchases products from TMP,
sells those products to a physician, and the physician does not retain CCPI’s services. TMP invoices distributors upon shipment
under terms which include a significant discount off AWP. TMP recognizes revenue under this model on the date of shipment at the
net invoice amount. In the event payment is not received within the term of the agreement, the amount payable for the purchased
TMP products reverts to the AWP. In addition, if payment is not received within the agreed-upon term, a late payment fee of up
to 20% may be applied to the outstanding balance.

Physician Managed Model (23%
of product revenues for the three months ended March 31, 2015): Under this model, a physician purchases products from TMP and retains
CCPI’s services. TMP invoices the physician upon shipment under terms which allow a significant rapid pay discount for payment
received within terms in accordance with the product purchase agreement, which includes a security interest for TMP in the products
and receivables generated by the dispensing of the products. The physician also executes a billing and claims processing services
agreement with CCPI for billing and collection services relating to our products (discussed below). CCPI submits a claim for reimbursement
on behalf of the physician client. The CCPI fee and product invoice amount are deducted from the reimbursement received by CCPI
on behalf of the physician client before the reimbursement is forwarded to the physician client. In the event the physician fails
to pay the product invoice within the agreed term, we can deduct the payment due from any of the reimbursements received by us
on behalf of the physician client as a result of the security interest we obtained in the products we sold to the physician client
and the receivables generated by selling the products in accordance with our agreement. In the event payment is not received within
the term of the agreement, the amount due from the physician for the purchased TMP products reverts to the AWP. In addition, if
payment is not received within the agreed-upon term, a late payment fee of up to 20% may be applied to the outstanding balance.

Hybrid Model (15% of product
revenues for the three months ended March 31, 2015): Under this model, a distributor purchases products from TMP and sells those
products to a physician and the physician retains CCPI’s services. TMP invoices distributors upon shipment under terms which
allow a significant rapid pay discount for payment received within terms in accordance with the product purchase agreements. The
physician client of the distributor executes a billing and claims processing services agreement with CCPI for billing and collection
services (discussed below). The distributor product invoice and the CCPI fee are deducted from the reimbursement received by CCPI
on behalf of the physician client before the reimbursement is forwarded to the distributor for further delivery to their physician
clients. In the event payment is not received within the term of the agreement, the amount payable for the purchased TMP products
reverts to the AWP. In addition, if payment is not received within the agreed-upon term, a late payment fee of up to 20% may be
applied to the outstanding balance.

Since we are in the early stage
of our business, as a courtesy to our physician clients, our general practice has been to extend the rapid pay discount from our
Physician Managed and Hybrid models beyond the initial term of the invoice until the invoice is paid and not to apply a late payment
fee to the outstanding balance.

Due to substantial uncertainties
as to the timing and collectability of revenues derived from our Physician Managed and Hybrid models, which can take in excess
of five years to collect, we have determined that these revenues do not meet the criteria for recognition, in accordance with The
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic No. ASC 605, Revenue Recognition (“ASC 605”), upon shipment. These revenues are recorded
when collectability is reasonably assured, which the Company has determined is when the payment is received, which is upon collection
of the claim.

The Company has entered
into an agreement with Cambridge Medical Funding Group, LLC (“CMFG”) related to California Workers’
Compensation (“WC”) benefit claims. Under this arrangement, we have determined that pursuant to FASB
ASC Topic No. 860, Transfers of Financial Assets and ASC 605 we have met the criteria for revenue recognition on the date
that payment is due from CMFG, which approximates the product shipment date.

CMFG #1 – WC Receivable
Purchase Assignment Model (“CMFG #1”) (26% of product revenues for the three months ended March 31,
2015): Under this model, physicians who purchase products from TMP under the Company’s Physician Managed Model will have
the option to assign their accounts receivables (primarily those accounts receivables with dates of service starting with the year
2013) from California WC benefit claims to CMFG, at a discounted rate. Each agreement is executed among CMFG, TMP, and each individual
physician, and serves as a master agreement for all assigned receivables by the physician to CMFG. Since these accounts receivable
originated from the Company’s Physician Managed Model, CCPI’s services are also retained. The physician’s fees
and financial obligations due to TMP, for the purchase of TMP product and use of CCPI’s services, are satisfied directly
by CMFG, usually within seven (7) days of transmission of the accounts receivable to CMFG. CMFG has agreed to pay an amount equal
to 20% of eligible assigned accounts receivable as an advance payment. CMFG makes this payment directly to TMP, on behalf of the
physician. TMP applies this payment to the physician’s financial obligations due to CCPI for the physician’s use of
the Company’s medical billing and claims processing services, and the physician’s financial obligation due to TMP for
the cost of the product. The Company recognizes revenue on the date that payment is due from CMFG. Under CMFG #1, the Company only
receives the 20% advance payment, where such payment is without recourse or future obligation for TMP to repay the 20% advanced
amount back to CMFG or the physician. Actual amounts collected on the assigned accounts receivable are shared between CMFG and
the physician, where the first 37% of amounts collected are disbursed to CMFG and additional amounts collected are shared at a
ratio of 75:25, where 75% is disbursed to the physician and 25% is disbursed to CMFG.

During the three months
ended March 31, 2015 and 2014, the Company issued billings to Physician Managed and Hybrid model customers aggregating $0.7 million
and $0.9 million, respectively, which were not recognized as revenues or accounts receivable in the accompanying consolidated financial
statements at the time of such billings. Direct costs associated with the above billings are expensed as incurred. Direct costs
associated with all billings, aggregating $121,856 and $139,319, respectively, were expensed in the accompanying consolidated financial
statements at the time of such billings. In accordance with the Company’s revenue recognition policy, the Company recognized
revenues from certain of these customers when cash was collected, aggregating $351,897 and $667,855 during the three months ended
March 31, 2015 and 2014, respectively. As of March 31, 2015, we had approximately $7.2 million in unrecorded accounts receivable
that potentially will be recorded as revenue in the future as our CCPI subsidiary secures claims payments on behalf of our PMM
and Hybrid Customers. All unpaid invoices underlying claims assigned to CMFG pursuant to CMFG #1 are excluded from unrecorded accounts
receivable.

CCPI receives no revenue
in the Physician Direct or Distributor Direct models because it does not provide collection and billing services to these customers.
In the Physician Managed and Hybrid models CCPI has a billing and claims processing service agreement with the physician. The billing
and claims processing agreement includes a service fee that is based upon a percentage of collections on all claims. Because fees
are only earned by CCPI upon collection of the claim, and the fee is not determinable until the amount of the collection of the
claim is known, CCPI recognizes revenue at the time claims are paid. Under CMFG #1 the Company recognizes revenue related to CCPI’s
services upon receipt of the 20% advance payment from CMFG.

No returns of products
are allowed except for products damaged in shipment, which historically have been insignificant.

The rapid pay discounts
to the AWP amount offered to the physician or distributor vary based upon the expected payment term from the physician or distributor.
The discounts are derived from the Company’s historical experience of the collection rates from internal sources and updated
for facts and circumstances and known trends and conditions in the industry, as appropriate. As described in the various models,
we recognize provisions for rapid pay discounts in the same period in which the related revenue is recorded. We believe that our
current provisions appropriately reflect our exposure for rapid pay discounts. These rapid pay discounts have typically ranged
from 40% to 88% of AWP.

Trade accounts receivable
are stated at the amount management expects to collect from outstanding balances. Currently, accounts receivable are comprised
of amounts due from our CMFG #1, distributor customers and other miscellaneous receivables. The carrying amounts of accounts receivable
are reduced by an allowance for doubtful accounts that reflects management’s best estimate of the amounts that will not be
collected. The Company individually reviews all accounts receivable balances and based upon an assessment of current creditworthiness,
estimates the portion, if any, of the balance that will not be collected. An allowance is recorded for those accounts that
are determined to likely be uncollectible through a charge to earnings and a credit to a valuation allowance. Balances that
remain outstanding after we have used reasonable collection efforts will be written off. Based on an assessment as of March 31,
2015 and December 31, 2014, of the collectability of invoices, we established an allowance for doubtful accounts of $55,773.

Under the Company’s
Physician Managed Model and Hybrid Model, CCPI performs billing and collection services on behalf of the physician client and
deducts the CCPI fee and product invoice amount from the reimbursement received by CCPI on behalf of the physician client before
the reimbursement is forwarded to the physician client. Extended collection periods are typical in the workers compensation industry
with payment terms extending from 45 days to in excess of five years. The physician remains personally liable for purchases of
product from TMP and TMP retains a security interest in all products sold to the physician, and the resulting claims receivable
from sales of the products. CCPI maintains an accounting of all managed accounts receivable on behalf of the physician. As described
above, due to uncertainties as to the timing and collectability of revenues derived from these models, revenue is recorded when
payment is received, there is no related accounts receivable, and therefore no allowance for doubtful accounts is necessary.

Property and equipment
are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets.
Computer equipment is depreciated over three to five years. Furniture and fixtures are depreciated over five to seven years. Leasehold
improvements are amortized over the shorter of fifteen years or term of the applicable property lease. Maintenance and repairs
are expensed as incurred; major renewals and betterments that extend the useful lives of property and equipment are capitalized.
When property and equipment is sold or retired, the related cost and accumulated depreciation are removed from the accounts and
any gain or loss is recognized. Amenities are capitalized as leasehold improvements.

The long-lived assets
held and used by the Company are reviewed for impairment no less frequently than annually or whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. In the event that facts and circumstances indicate that
the cost of any long-lived assets may be impaired, an evaluation of recoverability is performed. No impairment indicators existed
at March 31, 2015 and December 31, 2014, so no long-lived asset impairment was recorded.

Intangible assets with
finite lives, including patents and internally developed software (primarily the Company’s PDRx Software), are stated at
cost and are amortized over their useful lives. Patents are amortized on a straight line basis over their statutory lives, usually
fifteen to twenty years. Internally developed software is amortized over three to five years. Intangible assets with indefinite
lives are tested annually for impairment, during the fiscal fourth quarter and between annual periods, and more often when events
indicate that an impairment may exist. If impairment indicators exist, the intangible assets are written down to fair value as
required. The Company has one intangible asset with an indefinite life which is a domain name for medical foods. No impairment
indicators existed at March 31, 2015, or December 31, 2014, so no intangible asset impairment was recorded for the three months
ended March 31, 2015, or the year ended December 31, 2014.

The Company’s financial
instruments are accounts receivable, accounts payable, notes payable, and warrant derivative liability. The recorded values of
accounts receivable and accounts payable approximate their values based on their short term nature. Notes payable are recorded
at their issue value or if warrants are attached at their issue value less the proportionate value of the warrant. Warrants issued
with ratcheting provisions are classified as derivative liabilities and are revalued using the Black-Scholes model each quarter
based on changes in the market value of our common stock and unobservable level 3 inputs.

The Company defines fair
value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement
date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable
inputs. The fair value hierarchy is based on three levels of inputs that may be used to measure fair value, of which the first
two are considered observable and the last is considered unobservable:

Level 2: Inputs other than Level 1 that are
observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilities.

Level 3: assumptions: Unobservable inputs
that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities including
liabilities resulting from imbedded derivatives associated with certain warrants to purchase common stock.

Derivative liabilities
are recognized in the consolidated balance sheets at fair value based on the criteria specified in FASB ASC Topic 815-40 Derivatives
and Hedging – Contracts in Entity’s own Equity (“ASC 815-40”). Pursuant to ASC 815-40,
an evaluation of specifically identified conditions is made to determine whether the fair value of warrants issued is required
to be classified as a derivative liability instead of as equity. The estimated fair value of warrants classified as derivative
liabilities is determined using the Black-Scholes option pricing model. The model utilizes Level 3 unobservable inputs to calculate
the fair value of the warrants at each reporting period. The Company determined that using an alternative valuation model such
as a Binomial-Lattice model would result in minimal differences. The fair value of warrants classified as derivative liabilities
is adjusted for changes in fair value at each reporting period, and the corresponding non-cash gain or loss is recorded as other
income or expense in the consolidated statement of operations. As of March 31, 2015, 95,000 warrants were classified as derivative
liabilities. Each reporting period the warrants are re-valued and adjusted through the caption “change in fair value of
warrant liability” on the consolidated statements of operations. The Company’s remaining warrants are recorded to
additional paid in capital as equity instruments.

The Company determines
its income taxes under the asset and liability method. Under the asset and liability approach, deferred income tax assets and liabilities
are calculated and recorded based upon the future tax consequences of temporary differences by applying enacted statutory tax rates
applicable to future periods for differences between the financial statements carrying amounts and the tax basis of existing assets
and liabilities. Generally, deferred income taxes are classified as current or non-current in accordance with the classification
of the related asset or liability. Those not related to an asset or liability are classified as current or non-current depending
on the periods in which the temporary differences are expected to reverse. Valuation allowances are provided for significant deferred
income tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company recognizes
tax liabilities by prescribing a minimum probability threshold that a tax position must meet before a financial statement benefit
is recognized and also provides guidance on de-recognition, measurement, classification, interest and penalties, accounting in
interim periods, disclosure and transition. The minimum threshold is defined as a tax position that is more likely than not to
be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes,
based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that
is greater than fifty percent likely of being realized upon ultimate settlement. To the extent that the final tax outcome of these
matters is different than the amount recorded, such differences impact income tax expense in the period in which such determination
is made. Interest and penalties, if any, related to accrued liabilities for potential tax assessments are included in income tax
expense. U.S. GAAP also requires management to evaluate tax positions taken by the Company and recognize a liability if the Company
has taken uncertain tax positions that more likely than not would not be sustained upon examination by applicable taxing authorities.
Management of the Company has evaluated tax positions taken by the Company and has concluded that as of March 31, 2015, there are
no uncertain tax positions taken, or expected to be taken, that would require recognition of a liability that would require disclosure
in the financial statements.

The Company’s effective
tax rates were 0% for the three months ended March 31, 2015 and 2014. During the quarter ended June 30, 2013, the Company
decided to fully reserve its net deferred income tax assets by taking a full valuation allowance against these assets. As a result
of this decision, during the three months ended March 31, 2015 and 2014, the Company did not recognize any income tax benefit as
a result of its net loss. Thus, during the three months ended March 31, 2015 and 2014, the effective tax rate differed from the
U.S. federal statutory rate due to the change in the valuation allowance. The table below shows the balances for the deferred income
tax assets and liabilities as of the dates indicated.

March 31, 2015

December 31, 2014

Deferred income tax asset-short-term

$

1,604,903

$

1,517,270

Allowance

(1,604,903

)

(1,517,270

)

Deferred income tax asset-short-term, net

—

—

Deferred income tax asset-long-term

8,803,644

8,303,462

Deferred income tax liability-long-term

(1,024,649

)

(1,074,928

)

Deferred income tax asset-long-term

7,778,995

7,228,534

Allowance

(7,778,995

)

(7,228,534

)

Deferred income tax asset-long-term, net

—

—

Total deferred tax asset, net

$

—

$

—

The ultimate realization
of deferred tax assets is dependent upon the existence, or generation, of taxable income in the periods when those temporary differences
and net operating loss carryovers are deductible. Management considers the scheduled reversal of deferred tax liabilities, taxes
paid in carryover years, projected future taxable income, available tax planning strategies, and other factors in making this assessment.
Based on available evidence, management believes it is more likely than not that all of the deferred tax assets will not be realized.
Accordingly, the Company has maintained a valuation allowance for the current year.

At March 31, 2015, the
Company had total domestic Federal and state net operating loss carryovers of approximately $9,149,000 and $11,942,000, respectively.
Federal and state net operating loss carryovers expire at various dates between 2021 and 2032.

Under the Tax Reform Act
of 1986, as amended, the amounts of and benefits from net operating loss carryovers and research and development credits may be
impaired or limited in certain circumstances. Events which cause limitations in the amount of net operating losses that the Company
may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50%, as defined, over
a three year period. The Company does not believe that such an ownership change has occurred.

The Company accounts for
stock option awards in accordance with FASB ASC Topic No. 718, Compensation-Stock Compensation. Under FASB ASC Topic No.
718, compensation expense related to stock-based payments is recorded over the requisite service period based on the grant date
fair value of the awards. Compensation previously recorded for unvested stock options that are forfeited is reversed upon forfeiture.
The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. The Black-Scholes
model requires the use of assumptions which determine the fair value of stock-based awards, including the option’s expected
term and the price volatility of the underlying stock.

The Company’s accounting
policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of FASB
ASC Topic No. 505-50, Equity Based Payments to Non-Employees. Accordingly, the measurement date for the fair value of the
equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant
or vendor is reached or (ii) the date at which the consultant or vendor’s performance is complete. In the case of equity
instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

The Company utilizes FASB
ASC Topic No. 260, Earnings per Share. Basic loss per share is computed by dividing loss available to common shareholders
by the weighted-average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share
except that the denominator is increased to include the number of additional common shares that would have been outstanding if
the potential common shares had been issued and if the additional common shares were dilutive. Diluted loss per common share reflects
the potential dilution that could occur if convertible debentures, options and warrants were to be exercised or converted or otherwise
resulted in the issuance of common stock that then shared in the earnings of the entity.

Since the effects of outstanding
options, warrants and the conversion of convertible debt are anti-dilutive in all periods presented, shares of common stock underlying
these instruments have been excluded from the computation of loss per common share.

The following sets forth
the number of shares of common stock underlying outstanding options, warrants and convertible debt as of March 31, 2015 and 2014:

Research and development
costs are expensed as incurred. In instances where we enter into agreements with third parties for research and development activities,
we may prepay fees for services at the initiation of the contract. We record the prepayment as a prepaid asset and amortize the
asset into research and development expense over the period of time the contracted research and development services are performed.
Typically, we expensed 50% of the contract amount within the first two years of the contract and 50% over the remainder of the
record retention requirements under the contract based on our experience on how long the clinical trial service is provided.

Certain prior year amounts
have been reclassified for comparative purposes to conform to the current-year financial statement presentation. These reclassifications
had no effect on previously reported results of operations.

In May 2014, the FASB
issued Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts with Customers (Topic 606)”
which supersedes the revenue recognition requirements in Accounting Standards Codification (“ASC”) 605, Revenue Recognition.
The purpose of ASU 2014-09 is to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S.
GAAP and International Financial Reporting Standards. The amendments (i) remove inconsistencies and weaknesses in revenue
requirements, (ii) provide a more robust framework for addressing revenue issues, (iii) improve comparability of revenue recognition
across entities, industries, jurisdictions, and capital markets, (iv) provide more useful information to users of financial statements
through improved disclosure requirements, and (v) simplify the preparation of financial statements by reducing the number of requirements
to which an entity must refer. The new revenue recognition standard requires entities to recognize revenue in a way that
reflects the transfer of promised goods or services to customers in an amount based on the consideration to which the entity expects
to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for interim and annual reporting periods beginning
after December 15, 2016 and early adoption is not permitted. The amendments can be applied retrospectively to each prior
reporting period or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial
application. The Company has not determined what transition method it will use and is currently assessing the impact
that this guidance may have on its consolidated financial statements.

In August 2014, the FASB
issued ASU No. 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties
about an Entity’s Ability to Continue as a Going Concern.” ASU 2014-15 is intended to define management’s
responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and
to provide related footnote disclosures. ASU 2014-15 is effective for annual periods ending after December 15, 2016,
and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The
adoption of this standard is not expected to have a material effect on the Company’s operating results or financial condition.

Notes payable at March 31, 2015, and December
31, 2014, are comprised of the following:

March 31, 2015

December 31, 2014

Notes payable to William Shell Survivor’s Trust (a)

$

1,874,411

$

1,874,411

Notes payable to William Shell (b)

130,000

130,000

Notes payable to Lisa Liebman (c)

500,000

500,000

Note payable to Cambridge Medical Funding Group, LLC (d)

1,398,559

1,523,559

Note payable to Derma Medical Systems, Inc. (e)

650,000

—

Note payable to Shlomo Rechnitz (f)

1,151,890

—

Total notes payable

5,704,860

4,027,970

Less: debt discount

(350,609

)

(308,507

)

5,354,251

3,719,463

Less: current portion

(4,261,572

)

(3,597,173

)

Notes payable – long-term portion

$

1,092,679

$

122,290

(a)

Between January 2011 and December 2012, William E. Shell, M.D., the Company’s former Chief Executive Officer, former Chief Scientific Officer, greater than 10% shareholder and a former director, loaned $5,132,334 to the Company. As consideration for the loans, the Company issued promissory notes in the aggregate principal amount of (i) $4,982,334 to the Elizabeth Charuvastra and William Shell Family Trust dated July 27, 2006 and amended September 29, 2006 (the “Family Trust”), and (ii) $150,000 to the William Shell Survivor’s Trust (the “Survivor’s Trust”). At the time these promissory notes were issued, all of these notes were issued with maturity dates of five years from the date of issuance with interest payable on the maturity date. On June 22, 2012, the Company’s Board of Directors ratified an amendment that modified all promissory notes that were issued prior to June 22, 2012 to demand notes with interest payable quarterly (the “June 2012 Amendment”). The Company disputes the validity of the June 2012 Amendment. On December 21, 2012, all notes issued to the Family Trust were assigned to the Survivor’s Trust (the “WS Trust Notes”) which in turn assigned certain promissory notes, in the aggregate principal amount of $500,000, to Lisa Liebman. The WS Trust Notes accrue interest at rates ranging between 3.25% and 12.0% per annum.

During the three months ended March
31, 2015 and 2014, the Company incurred interest expense of $21,373 and $22,136, respectively, on the WS Trust Notes. At March
31, 2015 and December 31, 2014, accrued interest on the WS Trust Notes totaled $42,689 and 21,316, respectively.

On March 13, 2015, we received from
counsel for Dr. Shell, Ms. Liebman, the Elizabeth Charuvastra and William Shell Family Trust dated July 27, 2006 and amended September
29, 2006 (the “Family Trust”) and the William Shell Survivor’s Trust (the “Survivor’s
Trust”), a written demand for repayment of all principal and interest outstanding on all outstanding notes. The Company
disputes the enforceability of the demand.

(b)

On July 24, 2014, Dr. Shell loaned $130,000 to the Company. As consideration for the loan, the Company issued Dr. Shell a promissory note in the aggregate principal amount of $130,000 (the “Shell Note”). The Shell Note accrues interest at the rate of 8% per annum and is payable on demand. As additional consideration for entering into the loan agreement, Dr. Shell received 162,907 warrants to purchase shares of the Company’s common stock at an exercise price of $0.798 per share (the “Shell Warrant”). The Company recorded a debt discount in the amount of $44,867 based on the estimated fair value of the Shell Warrant. The debt discount was amortized as non-cash interest expense on the date of issuance using the effective interest method. During the three months ended March 31, 2015, the Company incurred interest expense of $2,564 on the Shell Note. At March 31, 2015 and December 31, 2014, accrued interest on the Shell Note totaled $4,502 and $1,938, respectively.

(c)

On December 21, 2012 the William Shell Survivor’s Trust assigned certain promissory notes, in the aggregate principal amount of $500,000, to Lisa Liebman (the “Liebman Notes”), a related party. Lisa Liebman is married to Dr. Shell. The Liebman Notes accrue interest at rates ranging between 3.25% and 3.95% per annum. The Liebman Notes were included in the disputed June 2012 Amendment. The principal and interest on the Liebman Notes is reflected as payable on demand. During both the three months ended March 31, 2015 and 2014, the Company incurred interest expense on the Liebman Notes of $4,732. At March 31, 2015 and December 31, 2014, accrued interest on the Liebman Notes totaled $9,569 and $4,837, respectively.

(d)

On June 28, 2013, the Company entered into an arrangement with CMFG which was governed pursuant to the terms of four contemporaneous agreements. On October 1, 2013, CMFG assigned its rights pursuant to the Workers’ Compensation Receivables Funding, Assignment and Security Agreement, to Raven Asset-Based Opportunity Fund I LP, a Delaware limited partnership (“Raven”). The components of the agreements are detailed as follows:

●

Workers’ Compensation Receivables Funding, Assignment and Security Agreement, as amended (“CMFG #2”) – The Company has assigned the future proceeds of accounts receivable of WC benefit claims with dates of service between the year 2007 and December 31, 2012 (the “Funded Receivables”), to Raven. In exchange, the Company received a loan of $3.2 million. Prior to July 1, 2014, the monthly division of collections on Funded Receivables was distributed as follows: First, to CMFG as a servicing fee in an amount equal to five percent (5%) of the collections; Second, to Raven to pay off any shortfalls from previous months (a shortfall will have been deemed to occur if Raven receives less than $175,000 in a given month); Third, to Raven in an amount up to $175,000; Fourth, to the Company in an amount of $125,000; Fifth, to Raven and the Company, the remainder of the Funded Receivables split at a ratio of 50% to 50%. Effective July 1, 2014, the monthly division of collections on the Funded Receivables was modified and until such time as Raven has received payment of $3.95 million in collections from Funded Receivables, the Funded Receivables will be distributed as follows: First, to CMFG as a servicing fee in an amount equal to five percent (5%) of the collections; Second, to Raven to pay off any shortfalls from previous months (a shortfall will have been deemed to occur if Raven receives less than $125,000 in a given month); Third, to Raven in an amount up to $125,000; Fourth, to the Company in an amount of $125,000; Fifth, to Raven and the Company, the remainder of the Funded Receivables split at a ratio of 50% to 50%. Once Raven has received payment of $3.95 million in collections from Funded Receivables, the Funded Receivables will cease to be distributed as described above, and will instead be distributed as follows: First, to CMFG as a servicing fee in an amount equal to five percent (5%) of the collections; and Second, to Raven and the Company, the remainder of the Funded Receivables split at a ratio of 45% to 55%, respectively.

●

Common Stock Warrant to James Giordano, CEO of CMFG – The Company issued a ten (10) year warrant to purchase 1,412,500 shares of common stock at an exercise price of $2.00 per share (the “Giordano Warrant”) as consideration for consulting services performed by Mr. Giordano, as described below. The warrants became exercisable during December 2013. The exercisable amount is limited to the average trading volume for the ten days prior to the date of exercise.

●

Professional Services and Consulting Agreement with Mr. Giordano – The Company entered into a consulting arrangement with Mr. Giordano for consulting services relating to medical receivable billing, billing/management strategies, and areas related to financing. Mr. Giordano’s only form of compensation for his consulting services was the issuance of the Giordano Warrant. The consulting agreement terminates at such time as all the obligations or contemplated transactions detailed in the Giordano Warrant have been satisfied.

●

Professional Services and Consulting Agreement with CMFG – The Company entered into a consulting arrangement with CMFG for consulting services relating to medical receivable billing, billing/management strategies, and areas related to financing. The agreement provided for the Company to pay a one-time fee of $64,000 upon execution of the agreement.

First, to CMFG as a servicing fee in an amount equal to five percent (5%) of the collections; Second, to Raven
to pay off any shortfalls from previous months (a shortfall will have been deemed to occur if Raven receives less than $125,000
in a given month); Third, to Raven in an amount up to $125,000; Fourth, to the Company in an amount of $125,000; Fifth, to Raven
and the Company, the remainder of the Funded Receivables split at a ratio of 50% to 50%.

First, to CMFG as a servicing fee in an amount equal
to five percent (5%) of the collections; Second, to CMFG to pay off any shortfalls from previous months (a shortfall will have
been deemed to occur if CMFG receives less than $175,000 in a given month); Third, to CMFG in an amount up to $175,000; Fourth,
to the Company in an amount of $125,000; Fifth, to CMFG and the Company, the remainder of the Funded Receivables split at a ratio
of 50% to 50%.

First, to CMFG as a servicing fee in an amount equal to five percent (5%) of the collections; and Second,
to Raven and the Company, the remainder of the Funded Receivables split at a ratio of 45% to 55%, respectively

On January 13, 2015, the Company entered into a securities purchase agreement, pursuant to which the Company sold a senior secured convertible debenture (the “Debenture”) in the principal amount of $650,000, to Derma Medical Systems, Inc. (“Derma”). Thomas R. Wenkart, M.D., a director of the Company, is the owner and President of Derma. The Debenture accrues interest at 4% per annum, throughout the term of the Debenture, and unless earlier converted into shares of the Company’s common stock, has a maturity date of January 12, 2018. Interest on the Debenture is paid semi-annually, at the Company’s option, in either cash or shares of common stock. At Derma’s option, the principal amount of the Debenture is convertible into shares of common stock at a conversion price of $0.30, subject to adjustment. During the three months ended March 31, 2015, the Company incurred interest expense of $5,485 on the Debenture. At March 31, 2015, accrued interest on the Debenture totaled $5,485.

[2]

On February 23, 2015, Shlomo Rechnitz loaned $1.2 million to the Company. As consideration for the loan, the Company issued Mr. Rechnitz a promissory note in the aggregate principal amount of $1.2 million (the “Rechnitz Note”). The Rechnitz Note accrues interest at 4% per annum, throughout its term, and has a maturity date of February 22, 2017. Principal and interest on the Rechnitz Note is payable in monthly installments of $52,109.91, beginning on March 22, 2015, and continuing until February 22, 2017. During the three months ended March 31, 2015, the Company incurred interest expense of $4,734 on the Rechnitz Note. At March 31, 2015, accrued interest on the Rechnitz Note totaled $734.